HP12c Credit Card Payment Calculation

[vrenaut74]

Okay so a little background, because after someone above saying they believe the question is purely academic, I was starting to think they were correct, because a % of the current balance as a minimum payment is something I've never seen.

I'm currently taking a CFP course in order to take the CFP exam, and this was a sample question, when going over debt management. I contacted the course admin and they did agree that this question is purely to get an understanding of how credit APRs and interest rates work, not to use your calculator to solve.

The answer is below:

Quote:The answer is 11 years. More importantly, how much in interest would you have paid the credit card company?

The answer is $1,902.

You would need to amortize this loan as follows:

Interest on first payment is $30 ($2,000 x 18%) / 12 months
Minimum payment is $54 calculated as the beginning balance ($2,000 x 2.7%)
The principal paid on this payment is $24 (the $54 minimum payment - $30 interest)

For the next payment, the balance is $1,976 ($2,000 - $24) of which $53.35 will paid, broken out at as $29.64 of interest [($1,976 x 18%) / 12] and $23.71 as principal ($53.35 - $29.64). You continue this process to obtain the 11 year answer.